Expanding your portfolio: What landlords should know in 2025

24th January 2025

If you’re thinking of expanding your portfolio and making further investment in buy-to-let in the coming year, you need to be clear on both your current financial position and how your commitments and profits might change in the future.

So, what is 2025 likely to bring that could affect the viability of your property portfolio and your position as a landlord?

The Renters’ Rights Bill (England only)

Labour’s RRB, which is currently at the Committee Report stage in the House of Commons and could pass into law as early as the spring, will bring the biggest change to letting in the last 25 years.

Section 21 is set to be abolished and with it, the assured shorthold tenancy agreement. Tenancies will become periodic (rolling from one month to the next), with tenants able to give two months’ notice at any time and landlords unable to evict them without a legally valid ground.

Some of the other key changes:

Landlords will be required to join an ombudsman and register themselves and their properties on a new online portal
Fines will increase
Bidding wars for new tenancies will be outlawed, with landlords unable to encourage rent bids above the advertised price
Landlords won’t be able to refuse a pet without a good reason
Blanket bans on tenants with children and in receipt of benefits will be illegal

Navigating these changes to ensure you remain fully legally compliant will be challenging, so it’s well worth working with a qualified agent that can handle most of the necessary administration on your behalf and take much of the legal responsibility off your shoulders.

However, there will be a rise in the ongoing cost of being a landlord and it’s essential to understand in particular how regaining possession of your property will change.

Changes to landlord insurance

Not only have insurance rates risen across the board, but with the likely passing of the RRB, there may be changes to the terms of your policy when it comes up for renewal.

If you have rent guarantee insurance, that is highly likely to change in light of the scrapping of section 21 and the increase in notice for eviction on the ground of rent arrears. The Bill proposes raising the arrears threshold from two to three months and doubling the notice period from two to four weeks.

While there might not be a huge rise in cost, it’s important to understand how future claims could be affected.

Mortgage rates and loan to value

If expanding your portfolio will mean you have four or more properties, the first thing to know is that this will impact mortgage lending, as your total borrowing cannot exceed 75% of your overall portfolio value.

So, if you’ve bought property in the last couple of years with a mortgage LTV of 80% or more, get an up-to-date valuation on all your buy to lets to check you have at least 25% equity.

Although the base rate has been predicted to steadily fall in the coming years, long term mortgage rates may rise in the short term as post the Labour budget, they are expected to fall more slowly. If you’ve had a five-year fixed rate that’s going to expire in 2025, make sure you know what increase there may be to your monthly payments and stress-test your figures to see what would happen if rates were to rise by 2% or more.

Future income and growth

Regularly evaluate your portfolio’s profitability by factoring in:

Maintenance expenses (e.g., boilers, roofing).
Rental income.
Inflation, with forecasts suggesting property and rental growth will outpace it.

Rental prices are projected to rise by approximately 17% over the next five years, exceeding both inflation and wage growth. Consult local market experts to understand trends in your area -many locations offer excellent investment opportunities.

Limited supply and high demand

The ongoing disparity between housing supply and demand in the UK continues to drive rental prices upward. With new housing developments failing to keep pace with population growth, landlords in areas with limited housing availability can often set competitive rental rates.

Potential for capital growth

Though property values may fluctuate in the short term, they have demonstrated consistent long-term growth, particularly in urban centres and economically dynamic regions. Cities like Manchester, Birmingham, and parts of London are benefiting from regeneration and infrastructure enhancements, making them promising areas for long-term property appreciation.

Review your tax planning

The biggest tax change recently for landlords in England was the increase in the higher Stamp Duty rate for additional properties, from 3% to 5%, as of 31^st October, which will add to the up-front cost for your next property purchase. It’s also worth noting that from 1^st April, the zero-rate threshold for the standard rate will drop back to £125,000, with a 2% rate applied to the portion from £125,001 to £250,000.

From 11^th December, Wales has also changed its Land Transaction Rates “the higher residential rates of Land Transaction Tax applying to purchases of additional residential properties will increase by 1%, raising an estimated additional £7 million in 2025-2026. This change is broadly in line with changes made to Stamp Duty Land Tax in England and Northern Ireland.” This is an additional 5% tax on top of the existing rates.

Source: https://www.gov.wales/a-budget-to-build-a-brighter-future-for-wales#

Although capital gains tax and inheritance tax wasn’t increased for property in the recent Autumn Budget, it’s important to recognise that both these are likely to apply to your property investments in the future. So do make sure you have discussed your plans for selling or passing on your portfolio with a financial adviser or wealth manager, and have taken proper estate planning advice to make sure you and your beneficiaries mitigate tax liabilities down the line.

And if you are reporting property income of more than £30,000 on your self-assessment tax return, a reminder that you must use HMRC’s Making Tax Digital (MTD) to submit quarterly returns online: